Friday, February 17, 2012

BLOG 122


It was my birthday on Monday. I’m feeling very glad that they only come once a year, as it was one of those days that start badly and then gradually get worse. I got to my local station only to find that the Metropolitan line was suspended because of over-running engineering works. “Surely”, I thought “by 9am they should have sorted that out”. Fortunately I can get the Bakerloo line from another station a bus ride away. Unfortunately that had “minor delays” too, but after a bit of a walk I did manage to get a London Overground train into Euston. So half an hour late getting to work.

I had an evening lecture engagement in Lincoln. “Why not go a bit early and have a quick look around Lincoln”, I thought. East Coast trains thought otherwise. The plan was to get the 14.08 from Kings Cross, change trains at Peterborough and got to Lincoln at a quarter to five. After the train left Stevenage they announced that the connecting train for Lincoln had been cancelled and passengers should remain on the train to Newark to get a connection from there. They left it till a lot later to explain that the connection from Newark involved waiting at Newark for over an hour. Fortunately it had a warm waiting room and I had my kindle in my case, so I could sit and read.

Even more fortunately the train got me into Lincoln at 5.15, so I only lost half an hour – and of course my chance for sightseeing as I was due to lecture at 6pm. I thought that as time was getting short I had better get a taxi to the venue but there was a long queue and the walking instructions said it would only take 17 minutes, so I decided to walk. It was then I noticed that they started “walk north-west”. Sadly I had not brought a compass with me and did not have a clue which direction was northwest. However I could see the spire of Lincoln Cathedral and knew that the cathedral was next to the castle and the lecture venue was the other side of the castle. So I reasoned that if I made a beeline for the cathedral I would be OK.

And I was. Well, sort of. After a few minutes walk I came to a steep hill. The road bent left at the top. I decided to climb the hill as it did not look too long a walk. Sadly the bend was hiding a steeper hill, and, yes, the bend at the top of that was hiding an even steeper one. Fortunately there was a bench at the top of that, as by the time I finished climbing I felt ready for a heart attack! OK, I should have remembered that they used to build castles on top of the highest hill around. But I didn’t reckon on anyone finding a hill quite that high and quite that steep.

I got to the lecture venue at about quarter to six. I then discovered that the connector to the projector would not attach to my notebook computer (they were both male end and one needed to be female). So I’d have to manage without the slides. The organiser then asked if I really needed a microphone, as someone had walked away with the Copel mike and although they could give me a hand held one, I would have to hold it all the time as it did not have a stand. After all that hill climbing, all I really wanted was a drink – and to get my breath back – but I couldn’t see a bar so told him that I speak loudly so I could manage without. Thankfully after my talk he gave me a lift back to the station (using a route that involved no steep hills at all!) in good time to catch my train.

I’d got a travel bargain. The fare from Lincoln to London was only £6.95 (I love bargains – OK, I’ve got a mean streak). For this I had to change trains and change stations too. East Midland Trains would deliver me to Newark Castle station and I would then have a short walk to Newark Northgate station from which East Coast trains would take me back to London.

That looked fine when I booked. At 9.00 at night in a strange town it looked far less inviting. Indeed, when I discovered that the walk from one station to the other was not signposted, I began to wish that I’d paid the full fare to get a direct train from Lincoln.

There was a map of central Newark at the station, so I could see where Newark Northgate was. Unfortunately I am not very good at remembering maps. Fortunately I didn’t walk too far in the wrong direction before I found another map! Fortunately also the train companies had allowed almost an hour for the traveller to find Northgate station. I didn’t need that long. Fortunately that warm waiting room I mentioned earlier was still open. I am currently reading Bleak House on my Kindle. I was beginning to think that it must be in Newark! (OK, that’s unfair; if it wasn’t cold and I knew where I was going, I would probably have looked more closely at Newark and found it pretty).

I got home around 12.15am, which means that I must have passed the last of my birthday on the Metropolitan line somewhere between Finchley Road and Wembley Park. To be honest I wasn’t looking. I wasn’t even feeling that I was glad to see the end of the day. I was just longing to get home!


Wednesday, February 15, 2012

BLOG 121


It’s interesting to see that the head of the Student Loans Company (SLC), Ed Lester, is not employed by SLC but is loaned into SLC by his personal service company. Lots of people work for a personal services company that they own. Indeed the tax system recognises this. It contains specific provisions to ensure that the interposition of a personal service company between employer and employee does not avoid tax (except, perhaps to a minimal, acceptable extent). This is colloquially known as the IR35 legislation.

So why have the media made such a fuss about Mr Lester’s “tax avoidance device” (to quote The Guardian)? It is not a tax avoidance device at all; it simply shifts, with parliamentary approval, the obligation to apply PAYE from the SLC to the personal services company. Indeed it is actually probably in the public interest. Mr Lester (through his company) seems to have volunteered to pay the employer’s National Insurance contribution that SLC would otherwise have paid out of the money received from the SLC. Mr Lester has magnanimously donated this “tax”, to the nation.

I don’t know why the Guardian has got upset. I suspect probably because it does not understand IR35. However I think it was right to get upset but for the wrong reason. This is because it reports that, “HMRC has approved the arrangement”. I think it right that Margaret Hodge, Chairman of the Public Accounts Committee, is quoted as saying that the arrangement is “likely to be” examined by her Committee. Indeed, I would have much preferred her to pledge that it will examine it.

There is no statutory machinery for HMRC to “approve” such an arrangement. Furthermore, unless there is something very strange about Mr Lester’s relationship with SLC, I find it hard to understand how the IR35 legislation cannot apply. This legislation basically asks the question, “If Mr Lester had contracted direct with SLC and been paid direct by SLC, would he have been an employee of SLC?

To misquote an old saying, if something looks like an employment and quacks like an employment, it is probably an employment. If a person works subject to the control of a board and is an integral part of the line management of an organisation, that looks like an employment to me. Indeed, I would myself be hard put if I were asked to try to convince HMRC that it was not an employment.

So what should the PAC ask? Firstly it should ask whether HMRC did indeed “approve” Mr Lester’s arrangement and, if it did, why it did so. If The Guardian has got it wrong and HMRC did not approve it, it should ask whether HMRC intend to invoke IR35 against the arrangements and, if not, why it does not intend to do so?

It is vital that it asks these questions because HMRC from time to time takes cases before the Tribunals and the courts in situations where most disinterested observers would question why they have sought to enforce a law which is clearly unfair. HMRC’s stock response is that they have a duty to collect the tax that the law exacts. They have no power to introduce a concept of what is fair. Whilst I myself question whether this is right – as I think their general care and management power absolves them from collecting tax where to do so would be so unfair that other taxpayers might question the legitimacy of the tax system – I can understand their approach.

However it ceases to be understandable if HMRC adopt a policy that enforcement of tax is only for the little people; highly paid public servants need not pay the tax that the law requires.

I am even more concerned that The Guardian tells me that, “Lester who lives in Buckinghamshire, also receives £550 a week to pay for his travel and living expenses and cover his costs of getting to the company’s office in Glasgow”. That is fine if his personal services company puts it on his P11D and he puts it on his tax return and pays tax on it. But if not, I can see no circumstance in which, in accordance with the tax legislation, it is not taxable on him – or in which he, after discussion with his advisors, could realistically believe that it is not taxable on him.

I think it vital that the PAC investigates what has happened. It must do its job properly! If not, why should anyone have confidence that the tax system operates without fear or favour; that it applies equally to everyone?

BLOG 120


I noticed a headline recently in (the profession’s online gossip column), “HMRC urged to meet with Portsmouth FC by PM”. Surely, I thought, HMRC is wholly independent of the government. It is outrageous for the Prime Minister to publicly tell it what to do. Then I thought that surely he wouldn’t do that, so I looked it up in Hansard. And yes he did. He called on HMRC “to meet the club so that it recoups the tax it is owed”. He added, “We must do everything we can to keep the friendly rivalry [between Portsmouth and Southampton football clubs] going”.

I’m a football fan. My club, West Ham United, got into financial difficulties. Two mad, millionaire businessmen, David Gold And David Sullivan bought it for far more than it was worth and have put a lot of money into it since. Mad, because commercially it would have been far more sensible to let it go into liquidation and buy the club, shorn of its debts, from the liquidator. I am grateful to the two Davids. But if they had not come along, I would not have expected taxpayers in Portsmouth, or in Manchester or Liverpool or anyone else, to give financial support to the club.

So why should the Prime Minister urge HMRC to talk to Portsmouth FC? It is a club that has been fighting off winding up petitions by HMRC since at least January 2010 (the last was issued on 24 January this year). Is Portsmouth FC too small to fail? It owes HMRC £1.6million, which is almost certainly VAT and/or PAYE. HMRC will have given this private company every opportunity to pay up prior to issuing its winding-up petition. I have never known them not consider a reasonable proposition for tax to be paid by instalments where cash flow projections show that the proposal is viable. HMRC know that if the club is wound up, they will have to write off most of the debt, as the footballing authorities have somehow created a system where, if a football club goes into liquidation, it has to pay the exorbitant salaries due to players and the huge transfer fees due to other clubs, before anyone else sees a penny out of whatever assets might remain.

Portsmouth FC may be important to Portsmouth as David Cameron suggests – although my recollection is that a lot of small businesses in Portsmouth have themselves been forced into insolvency because they did work for the football club and found themselves unable to recover the debt from it, so Portsmouth does not look that important to Portsmouth FC.

Personally I would have felt far comfortable if David Cameron were to ask HMRC to go easy on those very small businesses who suffer massive bad debts because bigger businesses ask them to do work knowing that they cannot pay for it. But as far as I am aware, he has not done so.

Indeed, when a very small business cannot pay its VAT or PAYE, in my experience HMRC get far more aggressive than if it cannot pay income tax or corporation tax because they claim (rightly, albeit unrealistically) that a business receives VAT from its customers, and deducts PAYE from salaries, as a trustee for HMRC, so they are not entitled to use such money towards their own running costs.

David Cameron however, apparently, has no compassion for very small businesses that incur bad debts. Let them go to the wall! I am not sure what he does have compassion for. He did not urge HMRC to talk to Woolworths or to Peacocks or to any other of the companies that have become insolvent over the last couple of years. It is only on behalf of Portsmouth FC that he urges leniency. Indeed, HMRC have also issued a winding-up petition against Heart of Midlothian FC and he has not urged HMRC to talk to them, even though, unlike Portsmouth, they have not already been talking to HMRC for the last two or three years over which HMRC have clearly lost patience – and I suspect have suffered a succession of broken promises.

Portsmouth has a population of around 207,000 people of which on average around 14,400 or around 7%, seem to regularly support Portsmouth FC. I would not myself have though that 7% suggests even that the club is important to the residents of Portsmouth as a recreation in these tough times. Edinburgh’s population is over twice that of Portsmouth so logically, if Portsmouth FC is vital to Portsmouth, Heart of Midlothian FC should be doubly important to Edinburgh, yet Mr Cameron has not urged HMRC to talk to Hearts.

So why does David Cameron want to urge HMRC to talk yet again to one private company in a provincial town? After all he is intent on separating retail banking from merchant banking so that in future no bank is too big to fail. It is some time since I looked at the statistics, but my recollection is that the vast majority of winding-up petitions are served by either HMRC or another government body. What is so important about Portsmouth FC that he should so want to single it out for special treatment? Is Portsmouth FC too small to fail? Or too important to the local economy to fail? Surely not! So why is Portsmouth different to Hearts? Surely it can’t be because Portsmouth has a Conservative MP and Hearts does not? Surely the Prime Minister puts the interests of the country before those of the Conservative party?

The real answer, I imagine, is that the Conservative MP for Portsmouth North asked him to call on HMRC to help Portsmouth FC to survive, and he didn’t have the guts to tell her that a business that pays salaries that it cannot afford, and as a result incurs massive debts, does not deserve to survive. That would have been honest. Indeed it is probably in the best interests of Portsmouth FC to be put into liquidation and for it to be resurrected freed of its massive debt burden (the administrator of its insolvent parent company has said that he will sell it only to someone who has £100million of finance available to pay for/put into the club). But that might lose a few votes for the Conservative party at the next local elections, so why not ask the taxpaying populace for forbearance so as to help the Conservatives?


Monday, February 13, 2012

BLOG 119


What gets you really really angry? My secretary probably says that with me it is the long letter from HMRC that disagrees with the highly convincing argument that I put to them.

She may be right! But I think it is waiting to pay for my groceries when the person in front insists on using a credit card to settle his £2.40 bill. Often he keys in his number too quickly (OK, I do it all the time on those rare instances when I use my credit card) and has to start again. Sometimes the credit card doesn’t work and he tries again with a different one. Why does the world seem to have such a hatred of good old legal tender? I generally shop with those blue bits of paper which the shop accepts are worth £20. Why can’t the rest of the world do that for trivial amounts?

Now I know the answer to that question. has explained to me that Dave Hartnett, the Parliamentary Secretary to HMRC, their top technical guy, says that paying cash is “diddling the country”. They go on to say that Dave has warned that “paying a builder or cleaner in cash will result in deeper government cuts to public services”. I am unclear whether paying Tesco or Asda in cash will, in Dave’s view, result in similar cuts. Is cash now wholly unacceptable? Is paying in cash as criminal as smoking cannabis or exceeding the speed limit or murdering my neighbour? (Don’t worry Charlie and Vince, I don’t intend to do it).

Or have HMRC lost touch with reality? Is everything that we do in life now wholly unacceptable unless we can provide independent third party evidence as to whether, and why, we did it?

Are we now in a society where tax rules our lives? Where we should not do anything at all without considering whether it might have tax consequences? Without documenting everything that we do just in case HMRC may want to question whether we are “diddling the country”?

That seems to be Dave’s world. I sincerely hope that I’m not forced to join it!